A pair of market research experts - including a C. T. Bauer College of
Business professor - is providing companies such as Amazon, Apple, Dell
and Samsung with a new set of tools for estimating damages in
Betsy D. Gelb, a long-time professor of Marketing & Entrepreneurship at
the University of Houston's Bauer College, says the tool she developed
with partner Gabriel Gelb, an expert in the field of intellectual
property litigation, may help discourage so-called "patent trolls."
The legal community has defined a "patent troll" as any firm that buys
up hundreds or thousands of patents simply to file suits and gain
settlements. "Even though these claims may seem preposterous," Betsy
Gelb says, "you've got to hire a lawyer and go to court. Some small
businesses are really being hurt by patent trolls."
Of course not all patent lawsuits are instigated by trolls. "Many patent
infringement cases are quite valid," the Gelbs say. "But it is true that
about half of all patent cases are filed by patent trolls."
The Gelbs' work could not be more timely.
In his State of the Union message Jan. 28, President Obama called for
patent reform legislation "to allow businesses to focus on innovation,
not costly, needless litigation." Also, the U.S. Supreme Court has
agreed to hear two appeals by companies that won patent-infringement
cases but did not win back their legal fees. If the court decides that
victors in such cases can force their opponents to pay attorney fees, it
may slow down frivolous patent-infringement lawsuits.
The Gelbs and others have helped pioneer a survey of buyers that
determines how much of the value of the item containing the patent at
issue is due to the patented feature.
"The research question becomes: What proportion of their purchae
decision is based on one such feature that incorporates the patent at
issue?" explains Betsy Gelb, the Larry J. Sachnowitz Professor of
Marketing & Entrepreneurship at Bauer College. "Possibly that feature
has considerable influence on the buyer's decision. Or quite possibly it
has very little."
Damages in a lawsuit are likely to depend on which answer a survey
Since 2010, the prevailing legal argument has been that if the patented
feature or component wasn't a factor influencing purchase, then
royalty-based damages were not justified. If the feature contributed
fractionally to the ultimate purchaser's decision, then that should be
the fraction of the revenue that would govern damages.
Third-party surveys, such as the ones the Gelbs conduct, demonstrate
what fraction of a buyer's purchase decision was based on the
patent-infringed component. Often, both sides conduct surveys.
In 2011, Gabriel Gelb successfully rebutted the work of an opposing
expert in Convolve Inc. v. Dell Inc. et al. The jury then awarded only 3
percent of the claimed damage amount.
"Many such surveys are conducted now," Betsy Gelb says. "Attorneys
contract for them because the new way to discourage patent trolls is to
say to them: Look at the results from a survey we commissioned of our
buyers and potential buyers. If you win in court, you win very little,
given the small influence of the patented feature. So, no, we don't want
to settle. And do you want to incur legal costs and then even if you
prevail, receive little or no damages?"
The Gelbs, who are married, work as consultants through Houston-based
Endeavor Management. Betsy Gelb, who has taught at Bauer College for
nearly four decades, has done extensive research in trademark, trade
dress, and other areas where marketing and legal issues meet. Gabriel
Gelb has been an expert witness in more than 100 intellectual property
Because survey research now represents a practical tool to create a
basis for valuing patents, the Gelbs say companies should act before a
lawsuit appears on the horizon, to see what buyers would say in response
to the surveys.
"You might like to know how much damage you would incur," Betsy Gelb
says, "because you might want to promote features or functions different
from the one that uses a controversial patent. Or if results show that
the buyers value that feature or function highly, you might want to
change the product itself.''
About the University of Houston
The University of Houston, Texas' premier metropolitan research and
teaching institution is home to more than 40 research centers and
institutes and sponsors more than 300 partnerships with corporate, civic
and governmental entities. UH, the most diverse research university in
the country, stands at the forefront of education, research and service
with more than 35,000 students.
About the C. T. Bauer College of Business
The C. T. Bauer College of Business has been in operation for more than
60 years at the University of Houston main campus. Through its five
academic departments, the college offers a full-range of undergraduate,
masters and doctoral degrees in business. The Bauer College is fully
accredited by the AACSB International - the Association to Advance
Collegiate Schools of Business. In August 2000, Houston business leader
and philanthropist Charles T. (Ted) Bauer endowed the College of
Business with a $40 million gift. In recognition of his generosity, the
college was renamed the C. T. Bauer College of Business.
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